Friday, April 15, 2016

Oil, Gas and Geopolitics In Turkish Cyprus

From Barron's Emerging Markets:

Turkish Cyprus: Oil, Fresh Citizens & Political Crisis?
With a political coalition breaking down in Northern Cyprus, which has been Turkish since 1974, talk of reunification with Greek Cyprus is likely to stall.

What’s at stake, especially for investors? Oil and gas off the Cyprus coast in the eastern Mediterranean, where Egypt and Israel are investing in future production. The Italian energy company Eni (E and ENI.Italy) and a unit of Israel’s Delek Group (DGRLY) are among the explorers involved. The nation of Turkey imports roughly half its oil needs from unstable  Iraq and Iran, and Turkey depends on Russia natural gas exports. Russia’s Gazprom (OGZPY) is Turkey’s largest supplier. The iShares MSCI Turkey exchange-traded fund (TUR), which is up nearly 5% this week, is up nearly 25% this year. The iShares MSCI Emerging Market ETF (EEM) is also up about 5% this week, but its 8.5% rise so far this year pales in comparison to Turkey ETF.

As for politics, Eurasia Group analysts James Sawyer, Naz Masraff and Mujtaba Rahman explain that the Turkish Cypriot National Unity Party (UBP) bowed out of the ruling coalition on April 4 and is “likely to form a right-wing coalition with the Democratic Party (DP) and three independents over the next few days.” This new government is likely to approve a two-year structural reform protocol being pushed by the Turkish government in Ankara, they say.

But, they add, “the coalition is unlikely to last for long given its one-seat majority and reliance on independent MPs who have previously defected the DP.” Conclusion? “Although reunification remains likely, the risk that the Turkish Cypriot government may spoil reunification by granting citizenship to Turkish settlers is rising.”...MORE